Will Tripura show ambition in Budget 2021?

The Tripura Budget Template

An analysis of the state’s budget from 2012–13 shows a fairly consistent template. Low internal revenue generation (Figure 1), heavy dependence on fiscal transfers from the union government (Figure 2), and insufficient spending on creating the necessary capital assets (Figure 3). Additional information provided in the Budget 2020–21 document also shows that a massive 56% of total expenditure in 2018–19 was spent only on salaries, wages, and retirement benefits. This, a result of having more than 1.5 lakh government employees for a population of only 40 lakhs (2021; projected).

Figure 1: State’s own revenue as a % of Revenue Receipts (Tripura, 2012–13 to 2020–21 (BE); Source: Budget documents)

Figure 2: Transfer from the Union Govt. as a % of Revenue Receipts (Tripura; 2012–13 to 2020–21(BE); Source: Budget Documents)

Figure 3: Capital Expenditure as a % of Total Expenditure (Tripura; 2012–13 to 2020–21 (BE); Source: Budget documents)

Budget 2021–22: Change in the offing?

After 25 years of uninterrupted rule by the Communist Party of India (Marxist) ended in 2018, the Bharatiya Janata Party came to power. However, this has not changed the budget template. If budget documents are a reflection of the priorities of the incumbent government, then the last three years have been merely a continuation of the earlier political dispensation.The state has yet to correct the under-investment in crucial sectors like health, education, and infrastructure. The lure of instant gratification in winning elections (panchayat elections in 2018, Lok Sabha elections in 2019, Tripura Tribal Areas Autonomous District Council (TTAADC) elections and municipal elections in 2021) has resulted in no significant long term vision or planning for the future of the state.

Learn from the numbers

For years, Tripura’s budget documents have been bereft of any ambition. The numbers camouflage a distinct lack of imagination. Yet, there are important lessons and warning signs to be gleaned from them.

Between 2012–13 and 2015–16, capital expenditure hovered around 25% of total expenditure. However, starting 2016–17, there’s a sudden drop in capital expenditure to just ~14% of total expenditure, resulting in a Compound Annual Growth Rate (CAGR) of only 1.25% between 2012–13 and 2018–19. To increase capital expenditure to the earlier level, the following projects may be taken up and completed over the next two years.

1. Super specialty hospitals in 3 more districts: Given the over-reliance on AGMC & G.B. Pant Hospital in Agartala, additional super specialty hospitals should be established in different parts of the state, preferably in Gomati, Dhalai, and North Tripura. A budget of approximately Rs.600 crores can be spent over the next 3 years to set up these new hospitals.
2. School consolidation & transport: According to the latest available data (U-DISE 2015–16), the number of schools in Tripura is 4850 with a total enrollment of 7,89,146. The average number of students per school is only 162, with several schools working with fewer numbers. It’s imperative that nearby schools are consolidated to a bigger school, and transportation is provided to students from hilly and remote areas. A model school can be set up in every district headquarters as a start, followed by one in each sub-division.
3. State highways and roads: Access to remote, hilly and tribal areas are either difficult or impossible due to lack of quality roads. Significant investment has to be made to develop and maintain high quality roads that suit the terrain and weather conditions of the state.

However, where will the state find resources to fuel its ambitions? Expenditure has been growing faster than revenue in the last decade. Between 2012–13 & 2018–19, the total expenditure of the state grew at a compound annual growth rate (CAGR) of 10.2% against 8.3% for total revenue. The widening gap is a cause for concern. Tripura is heavily dependent on transfers from the union government; the state’s own revenue is only 18% of the total revenue, one of the lowest in the country. To increase revenue, the state can consider the following.

1. Borrow more: According to the Reserve Bank of India, the debt level of a state is sustainable if interest payment is less than 10% of its revenue receipts. Tripura has been spending only 7%-8% of its revenue receipts on interest payments which indicates that the state has capacity to borrow more.
2. Raise excise duty on alcohol & increase the number of Foreign Liquor Shops: Tripura’s income from excise duty is only 1.78% of total revenue, lower than neighbouring states Assam (2.2%) and Meghalaya (2.3%), and significantly lower than the national average of 6%.

At the same time, the government should also take a hard look at its committed expenditure and create fiscal space. According to the latest audited figures available (2018–19 Actuals), Salaries & Wages (41.25%), Pension & other retirement benefits (14.68%), Payment of Interest (7.35%), and Repayment of Loans (3.59%) account for 66.87% of the total expenditure, one of the highest in the country. This left only 33.13% for all other expenditure, including centrally sponsored schemes.

1. Reduce the number of government employees on government scale by slowing down recruitment and offering new VRS packages: As on 31.12.2019, the state government employs 1,10,517 people on a regular scale compared to 1,03,703 people in 2013. According to the retirement profile included in the Budget Documents 2020–21, nearly 44,000 people are set to retire in the next 10 years. Government should cut down on recruitment so that the overall number of government employees reduces significantly. An attractive VRS package may be offered to employees above 50 to retire early. Rationalisation of the remaining employees must be done to ensure smooth functioning of various offices.
2. Rationalise the number of ad-hoc workers: A careful evaluation of the need for more than 40,000 ad-hoc workers has to be undertaken to reduce it to the bare minimum necessary in the next 10 years.

Hope: The Conclusion

As one of the poorest states in the country, Tripura has to show the willingness to think bold and act swiftly. The upcoming Budget 2021 offers the government to make amends. However, the announcement that the elections to the Tripura Tribal Areas Autonomous District Councils will be held in April might tip in the scales in favour of instant gratification, when the state is in dire need of long term investment in health, education, and infrastructure. Let’s hope that wiser counsel prevails.